Changes

*Section 936(h)(3)(B)(i) implicitly includes trade-secrets through ‘invention, formula, process, design, pattern, or know-how”. Providing incentives for firms to keep trade-secrets directly induces the market failures than much innovation policy is intended to mitigate. It also has an extensive moral hazard issue.

Question: To what extent should gross receipts from services that are directly related to a product that uses qualified property be included in the determination of qualified gross receipts?

*Weighting deductions by R&D expenditure disincentivizes the creation of a market for ideas, where many participants act as intermediaries.

Question: What would be the appropriate approach in determining the expenses properly allocable to innovation profits? Should the proposal just include authority for the Secretary to adopt allocation rules or is more specific guidance necessary?